Friday September 16th, 2005

Post-Katrina natural gas shortages more worrisome than gasoline shortages...Hurricane and ensuing higher gasoline prices generate renewed calls for more stringent auto fuel economy requirements...

Bush administration officials say they're concerned about possible natural gas shortages in the wake of Hurricane Katrina. Energy Secretary Samuel Bodman says there's less known about the storm's damage to the natural gas supply system than about its effect on crude oil production. Bodman met with industry executives in Houston last week to get an update on hurricane recovery efforts. He's been touring regions ravaged by Katrina, along with Interior Secretary Gale Norton and Transportation Secretary Norman Mineta. Interior Secretary Norton expects 90 percent of Gulf oil platforms back in action by month's end, but agrees that natural gas could be more of a problem because there's less of an international market to rely on in the meantime. The Energy Department says 58 percent of Gulf oil production is down, as is 38 percent of natural gas production. Energy analysts have predicted natural gas prices could soar this winter, with increases as high as 71 percent in parts of the Midwest. Energy expert Matthew Simmons says Hurricane Katrina could have a bigger impact on the country than first thought.

Matthew Simmons audio 1

In his recent book Twilight in the Desert, Simmons questioned whether the world has the oil and natural gas resources to meet future demands.

Matthew Simmons audio 2

Robin West is chairman of PFC Energy in Washington, and he's been saying the world is running out of oil production capacity.

Robin West audio 1

West says for energy security, demand must be addressed.

Robin West audio 2

West and Simmons spoke at a recent Houston World Affairs Council debate on whether the world has enough energy resources to meet the demands of the future.

The world's oil supply will reach its peak--someday. But when someday will actually come remains up for debate. Officers from the Association for the Study of Peak Oil say oil prices are likely to keep rising because major worldwide oil fields are depleting with demand rising. Group co-founder Steve Andrews noted that a report this year from the U. S. Department of Energy's National Technology Laboratory warned about the possibilities. It said that the world is "fast approaching the inevitable peaking of conventional world oil production.'' Top oil producer Saudi Arabia, oil majors and others in the oil industry anticipate that crude will be plentiful for another generation.

Hurricane Katrina and ensuing higher gasoline prices have generated new Congressional support for more stringent auto fuel economy requirements. Members of Congress are talking about the need for a second energy bill that goes beyond the one signed by President Bush earlier this summer. Senate Energy Committee Chairman Senator Pete Domenici says the hurricane exposed the harsh reality that "we have been skating on thin ice" when it comes to energy concentrations on the Gulf Coast. The New Mexico senator predicts the drilling ban on the Alaska refuge will be lifted.

North America's already-tight natural gas supply/demand balance was racheted tighter by Hurricane Katrina. But that tightness could be relieved somewhat for the coming winter by encouraging conservation and fuel flexibility. That's the opinion of the senior director of North American Natural Gas atCambridge Energy Research Associates. Michael Zenker testified last week to the Houston Government Reform Subcommittee on Energy and Resources. He says if all residential and commercial customers turned down their thermostats just two degrees this winter, the decline in natural gas consumption would more than offset the loss of supplies resulting from Katrina.

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